Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The biggest unknown in Africa is the extent to which
Speaker 2: governance will respond to thicker populations, greater growth, greater capacity
Speaker 2: to raise taxes and therefore expand the capabilities of government.
Speaker 2: To What extent will African governments respond to this more benign,
Speaker 2: positive environment and up their game.
Speaker 1: Welcome to Marrion Dogs Money, the podcast in which people
Speaker 1: who know the markets explain the markets.
Speaker 2: I'm Marry in Sunset Web.
Speaker 1: This week we are focusing on one of the most
Speaker 1: misunderstood and often oversimplified dimensions of economic development population. Just
Speaker 1: add Wealth, journalist and author of How Africa Works, Success
Speaker 1: and Failure on the World's Last Development Frontier, joins me
Speaker 1: today and we talk about how population dynamics shape Africa's
Speaker 1: economic trajectory, not just in terms of size, but also structure.
Speaker 1: And we talk about how demographics can influence industrialization, urbanization,
Speaker 1: and political stability. Joe, Welcome to Marin Talks Money.
Speaker 2: Thank you for having me.
Speaker 1: The first thing to say, I guess is that a
Speaker 1: book that is just about Africa is a little all encompassing.
Speaker 1: Africa is full of, you know, so many different countries,
Speaker 1: different cultures, different languages, endless, different things going on. So
Speaker 1: I suppose the first thing we should talk about is
Speaker 1: to what extent is it really possible to generalize about
Speaker 1: a continent that is so huge and so diverse.
Speaker 2: You're right, but we generalize about Asia and talking about
Speaker 2: Asia at the same time, and there's almost as much
Speaker 2: diversity in Asia. So I think we have to recognize
Speaker 2: that that fifty five countries are very different in Africa,
Speaker 2: but nonetheless there they are on this vast land mass
Speaker 2: together and their economies are going to evolve with close
Speaker 2: relations with each other as we go forward. So there
Speaker 2: is to my mind still a value in talking economically
Speaker 2: about Africa, and you can sort of see that in
Speaker 2: terms of what's happening within the continent, because there was
Speaker 2: a trend to put the Arab states in with the
Speaker 2: Middle East over the last sort of thirty forty years,
Speaker 2: so and not count North Africa really as part of Africa,
Speaker 2: but the North African countries themselves, now that there is
Speaker 2: some economic traction in Sub Saharan Africa, are starting to
Speaker 2: talk about themselves as being fundamentally African states.
Speaker 1: Okay, So when you went into this, because your last
Speaker 1: very well known book was How Asia Works into How
Speaker 1: Africa Works. It's a bit of a shift. Did you
Speaker 1: go into this with an expectation of what you would find?
Speaker 2: I didn't go with an expectation of what I would find.
Speaker 2: I thought that there might be something different about what
Speaker 2: was required in Africa in policy terms. I think that's
Speaker 2: about as much of a predisposition as I had. I mean,
Speaker 2: I started out by reading through the academic literature, and
Speaker 2: so I went through all the literature on governance, failure
Speaker 2: of which has a huge amount in Africa, corruption, kleptocracy,
Speaker 2: civil strife, ethnic strife. But I got to the end
Speaker 2: of reading all that feeling that I hadn't really got
Speaker 2: an argument about what the fundamental reason was why Africa's
Speaker 2: development had lagged as much as it as it has.
Speaker 2: And that's what took me on to the demographic stuff
Speaker 2: that I got to eventually.
Speaker 1: Okay, so you felt that all these things that're sort
Speaker 1: of relentless debt, the conflict, ethnic conflict in particular, the
Speaker 1: corruption and cryptocracy, etcetera, and none of these things were
Speaker 1: in themselves enough to explain why Africa has not been
Speaker 1: able to develop in the same way as other areas.
Speaker 2: Yeah, often symptomatic rather than fundamental reasons for development failure,
Speaker 2: if you like. It was when I got to the
Speaker 2: demographics that I felt that I found something that had
Speaker 2: much more powerful explanatory potential.
Speaker 1: When you looked at Asia. Was that something that stood
Speaker 1: out to you at the time, or did that come later?
Speaker 1: Was it only when you started looking at Africa that
Speaker 1: you looked back at Asia and thought, well, that already
Speaker 1: had this population density or did it not really come up? Then?
Speaker 2: One always discuss demographics in Asia because it was it
Speaker 2: was always relevant, but you didn't discuss it that much
Speaker 2: because it was never a problem. Asia in nineteen sixty
Speaker 2: always had a sufficient demographic density to be able to
Speaker 2: pay for its infrastructure, to have deep concentrated urban markets,
Speaker 2: to raise taxism, in all of the stuff that you
Speaker 2: need to do developmentally. So I had never thought, in
Speaker 2: two three decades working in Asia of demographics as something
Speaker 2: that could fundamental constrain economic development. It was just a
Speaker 2: sort of marginal variable.
Speaker 1: Let's talk about how it can constrain them. What is
Speaker 1: it about population density that makes it different?
Speaker 2: Well, when you have super low population density, is you
Speaker 2: did in Africa? If you go back to the end
Speaker 2: of the Second World War, Africa is this vast land
Speaker 2: mass into which you can fit China, India, Europe and
Speaker 2: the US. And it's hard to believe, but if you
Speaker 2: cut the countries out of an atless and try, you'll
Speaker 2: find that that's correct. That's how vast Africa is. And
Speaker 2: yet it had only two hundred and twenty million people
Speaker 2: at the end of the Second World War. The constraint
Speaker 2: that produces is that you get population density averaged over
Speaker 2: Africa of less than ten people per square kilometer. You
Speaker 2: think of the size of a square kilometer and only
Speaker 2: ten people in it. It's very few. And the impact
Speaker 2: that this has economically is well, you don't have markets.
Speaker 2: You don't have meaningful concentrated markets. So if you think
Speaker 2: nineteen hundred for Africa, the two biggest cities were Legos
Speaker 2: and DRIs Salam, and they had populations of twenty thousand people.
Speaker 2: And this is a time when cities like Singapore or
Speaker 2: Shanghai and East Asia had a quarter a million or
Speaker 2: half a million in the case of Singapore. So it's
Speaker 2: just a different order of magnitude. So you haven't got
Speaker 2: concentrated centers of population to demand goods and will reliably
Speaker 2: pay for goods and services. And also cities have always
Speaker 2: been very, very important historically as places to raise tax.
Speaker 2: It's always been much easier to get tax off urbanites
Speaker 2: than it is off people living in a dispersed condition
Speaker 2: in the countryside. So that problem, and then you've the
Speaker 2: problem that you've got to have infrastructure to have a
Speaker 2: modern economy, and you can look you look at infrastructure
Speaker 2: costs per capita, and Africa in nineteen sixty can't afford anything,
Speaker 2: can't afford rows, can't afford power networks, kind of bored
Speaker 2: irrigation systems, any of the things. You know, there are
Speaker 2: things that get built, usually with sort of foreign foreign aid,
Speaker 2: but there's nothing is affordable within the internal capability of
Speaker 2: African governments. So you're just totally constrained. And you know,
Speaker 2: if you want the cross the historical comparison for the
Speaker 2: population density, that of Africa in nineteen sixty was equivalent
Speaker 2: to Europe in fifteen hundred, and so then we ask
Speaker 2: how much growth was there in Europe in fifteen hundred, Well,
Speaker 2: there wasn't only so why did we think that there
Speaker 2: was going to be lots of growth in Africa? Yes,
Speaker 2: I think it was. You know, some of the things
Speaker 2: that were said in the sixties and the seventies about
Speaker 2: what Africa could do were frankly crazy and were really
Speaker 2: just based around some mineral investments, and people thought that
Speaker 2: these mineral enclaves were going to translate into broad economic development,
Speaker 2: which they don't anywhere in the world because mineral economies
Speaker 2: employ very few people and they are genuine enclaves cut
Speaker 2: off from the rest of the economy. And I'm not
Speaker 2: saying that you shouldn't dig up your minerals. You should
Speaker 2: dig up your minerals, but they do not lead to
Speaker 2: broad based economic developments.
Speaker 1: Okay. So the argument is that now much of Africa
Speaker 1: has reached the level of population deentity that Southeast Asia
Speaker 1: had already hit in the sixties, and that should be
Speaker 1: the thing that suddenly pushes economic growth higher. And one
Speaker 1: of the things you talk about in the book is
Speaker 1: that this tends to start with fast rises in agricultural growth,
Speaker 1: particularly agricultural productivity, and we're already seeing that.
Speaker 2: Yeah. So that's I think the biggest sort of or
Speaker 2: the hardest evidence for optimism, if you like, in the
Speaker 2: book would be what's been going on in agriculture since
Speaker 2: the mid nineties. But to make things more straightforward, I
Speaker 2: provide data from two thousand onwards, since when agricultural growth
Speaker 2: in Africa as a whole has been an over four
Speaker 2: percent a year, highest rate in the world, and in
Speaker 2: you know, many countries a lot higher than that. Nigeria
Speaker 2: has been doing six percent a year. And it's not
Speaker 2: because the government has got great agriculture policy. It's because
Speaker 2: of the density of the population. And what's happened in
Speaker 2: Africa is that as population has doubled approximately in twenty
Speaker 2: five years, because there's been a bit of economic growth
Speaker 2: as well, demand for food by value has tripled. That
Speaker 2: drives the production of crops that's good for ordinary people,
Speaker 2: small holder farmers, but particularly in peri urban areas. So
Speaker 2: African agriculture is becoming very bifurcated now between people who
Speaker 2: are farming around cities, of which there are over seven
Speaker 2: thousands designated cities in Africa now people who are farming
Speaker 2: in those areas because the urban demand is so relentless,
Speaker 2: so reliable, that you can grow relatively value added crops
Speaker 2: things like tomatoes instead of what you would have grown
Speaker 2: in the deep countryside, and you can sell it, and
Speaker 2: you can make thousands of dollars per hector, and you
Speaker 2: can afford to buy little pumps and irrigate your soil,
Speaker 2: and that will allow you to increase yields. At the
Speaker 2: same time as that is going on in a lot
Speaker 2: of places in deep rural Africa where nothing has changed yet.
Speaker 1: And across Africa, is agricultural production keeping up with population
Speaker 1: growth because these are really fast growing populations.
Speaker 2: Now, yes, it is so. By value, agricultural output is,
Speaker 2: as I said, going up over four percent a year.
Speaker 2: Population is going up less than three. So population growth
Speaker 2: is slowing more slowly than it did in East Asia,
Speaker 2: but it is nonetheless slowing. And in some African countries
Speaker 2: there's a lot of variation.
Speaker 1: So fertility rates are falling in Africa in the same
Speaker 1: way as there every wh else, not to the e
Speaker 1: same extent, obviously, but they are still falling.
Speaker 2: They're falling, but they're coming down from a high level.
Speaker 2: And so this means that it will be some time
Speaker 2: before Africa gets its demographic dividend, in other words, where
Speaker 2: it gets a very large share of working people relative
Speaker 2: to kids and older people. To my mind, one of
Speaker 2: the most useful things that the what remains that the
Speaker 2: aid industry can do in Africa is to put money
Speaker 2: into female education because that is very closely correlated with
Speaker 2: lifetime fertility. I even girls who just do primary school
Speaker 2: have a massively reduced propensity to have lots of kids
Speaker 2: during their lifetime. And it's economically very important because the
Speaker 2: bigger and longer the demographic dividend, the better it is
Speaker 2: obviously for African development.
Speaker 1: Okay, but interesting, So we don't necessarily want fertility where's
Speaker 1: to fall in Africa though, I mean it based on
Speaker 1: this idea of population density, you would want populations to
Speaker 1: increase for some time to come to produce that population dividend.
Speaker 2: No, I mean, I think that this is not a
Speaker 2: perfect science. But to my mind, once you get beyond
Speaker 2: sort of fifty sixty seventy people per square kilometer on average,
Speaker 2: obviously your your urban densities are massively higher than that,
Speaker 2: then reducing population growth abruptly in order to maximize the
Speaker 2: demographic dividend makes sense. It's not the case that there's
Speaker 2: a direct correlation that the more people you get, the
Speaker 2: better it is for forever and forever. It's about having
Speaker 2: a minimum, a minimum density of people. That means that
Speaker 2: you can afford the infrastructure that you have, the markets
Speaker 2: that you've got, the division of labor that's required to
Speaker 2: do complex things efficiently.
Speaker 1: Okay, so fifty sixty is around ideal. I mean, I
Speaker 1: know it's not a precise science.
Speaker 2: But it's not a perfect science. And I'm just making
Speaker 2: historical analogies with what the case was in Asia. But
Speaker 2: I'm saying that clearly, you know, nine to ten was
Speaker 2: way too low. You know, fifty sixty work for Asia.
Speaker 2: But having been fifty sixty in Asia, it then tripled
Speaker 2: over the next seventy years. In any STAGEA, it's now
Speaker 2: around one hundred and fifty. But Africa will go to
Speaker 2: one hundred and fifty on its current population trajectory. I mean,
Speaker 2: there's going to be four billion people at the end
Speaker 2: of the century in Africa, and there'll be four billion
Speaker 2: people in Asia, and there will be only two billion
Speaker 2: people in the rest of the world, if the UN's
Speaker 2: projections are to be believed.
Speaker 1: Aren't I mean, they're mostly out by quite a lot,
Speaker 1: aren't They generally get precise? I mean, they keep changing.
Speaker 1: The idea of a peak global populations that started. Let's
Speaker 1: go back actually to education, because I know that one
Speaker 1: of the things that you also say is that people
Speaker 1: underestimate how well educated Africa's population is and therefore how
Speaker 1: ready it is for economic growth. And obviously efficient education
Speaker 1: is also a function of population identity to a degree,
Speaker 1: but it's underappreciated, isn't it.
Speaker 2: Yeah, I think that what African government's managed to do
Speaker 2: post nineteen sixty in education is really underreported and was
Speaker 2: very important. So I mean again, it was this very
Speaker 2: low population density that meant that colonial governments couldn't raise
Speaker 2: tax either. So their response to not being able to
Speaker 2: raise any significant tax was to not run schools. And
Speaker 2: there were no schools bar missionary schools in Africa until
Speaker 2: the nineteen fifties, I mean one or two tiny exceptions,
Speaker 2: so that obviously South Africa was an exception, Mauritius was
Speaker 2: an exception, but elsewhere there are no schools until the fifties.
Speaker 2: And so in nineteen sixty Africa comes into the independence
Speaker 2: era with a literacy rate of sixteen one six percent
Speaker 2: and a female literacy rate of five percent. And this makes,
Speaker 2: you know, modern economic activity really close to impossible, and
Speaker 2: African governments put huge resources into opening schools after nineteen
Speaker 2: sixty and the World Bank in the seventies did a
Speaker 2: review of what had been done and said, nowhere in
Speaker 2: the world has built education systems as fast as Africa.
Speaker 2: I mean this genuinely extraordinary what has been achieved here,
Speaker 2: you know. And if you take a single country example,
Speaker 2: I mean someone like Julius Nareerri running Tanzania after independence.
Speaker 2: He inherited a country with a literacy rate of fifteen
Speaker 2: percent and by the mid eighties literacy was up to
Speaker 2: over eighty percent. So all that has been very important.
Speaker 2: And without that educational progress, I don't think that the
Speaker 2: thickening of populations would be producing the pick up in
Speaker 2: growth that we've been seeing since the turn of the century.
Speaker 1: Okay, so outside agriculture, where is the growth coming from?
Speaker 1: The big drivers?
Speaker 2: Well, I think you've got to sort of add that
Speaker 2: there's the other bit of agriculture, the manufacturing end of agriculture,
Speaker 2: which we always forget about because we always think agriculture
Speaker 2: is about farmers. But of course once you've produced the crops,
Speaker 2: then the crops have got to be milled, they've got
Speaker 2: to be turned into processed foods. There has been a
Speaker 2: colossal boom in process foods in Africa all across Africa
Speaker 2: in the last twenty five years. Most Africans now eat
Speaker 2: African produced processed foods and they're very local to local taste.
Speaker 2: I mean, what Nigerians eat even in one body of
Speaker 2: Nigeria is not what Nigerians buy in another part, and
Speaker 2: there's certainly not they what they buy in different areas
Speaker 2: of Africa. And that has meant a fantastic boom in
Speaker 2: the manufacturing end of agriculture. And it's reckoned that around
Speaker 2: half of all the capital expenditure and manufacturing in Africa
Speaker 2: at the moment is going on agricultural processing. So there's that,
Speaker 2: and then you have it's very variable by country. You
Speaker 2: have the beginnings of some greater amount of other manufacturing
Speaker 2: in Africa. But this is a return if you look
Speaker 2: at it as a share of GDP, it's sort of
Speaker 2: bottoming out and going up and hopefully heading back towards
Speaker 2: where we were in the seventies. At the end of
Speaker 2: the seventies, and that is because after independence, when economies
Speaker 2: were much smaller, African governments put a lot of money
Speaker 2: into manufacturing projects and they almost all failed again largely
Speaker 2: would fail because for demographic reasons. In nineteen sixty labor rates,
Speaker 2: factory labor rates in Africa were twice what they were
Speaker 2: in Asia. It seems extraordinary. That's the supply and demand
Speaker 2: of human labor. But now wage rates if you compare
Speaker 2: with China, so China's at about six hundred dollars per
Speaker 2: month for factory labor now and if you compare with that,
Speaker 2: different African countries are between half and one tenth, so
Speaker 2: that the cheapest will be places like Muddy Gasca or
Speaker 2: Ethiopia sixty bucks a month for a factory worker. Of course,
Speaker 2: that's bringing in some some investment. And the leaders in
Speaker 2: the manufacturing investment if you think of FDI are the Chinese.
Speaker 2: There was a piece in The Economist last week or
Speaker 2: the week before talking about this. It's reckoned based on
Speaker 2: the fts on the Financial Times FDI database, which is
Speaker 2: micro level firm by firm. It's reckoned that the Chinese
Speaker 2: put twelve over twelve billion into manufacturing investment in China
Speaker 2: last year. And most of it is because profit rates
Speaker 2: are pretty low in China. Now, you know, things are
Speaker 2: so competitive, and they come and they look at Africa
Speaker 2: and you know often people are seeing products that are
Speaker 2: priced three, four, five times what they cost in China,
Speaker 2: and so Chinese investment is coming chasing better returns, and
Speaker 2: it's a sort of a slow a slow build. It's
Speaker 2: not held by the fact that African go moments don't
Speaker 2: recognize that manufacturing is something that you just cannot develop
Speaker 2: quickly without because it's massively the most efficient way to
Speaker 2: take your rural population into the modern economy. There's just
Speaker 2: no kind of there's no sort of political commitment really
Speaker 2: to manufacturing in Africa, although the African Union has tried
Speaker 2: to ferment one, but nonetheless manufacturing is going on. And
Speaker 2: when you go and visit manufacturing, harbs, manufacturing enclaves in Africa,
Speaker 2: each of the one so you know, I went to Lasutu,
Speaker 2: to Madagascar, to Morocco, and in each of these places
Speaker 2: you just think, well, there's no real reason why there
Speaker 2: can't be a lot more of this here because the
Speaker 2: labor is it starts off massively less productive than in China,
Speaker 2: but it goes up a fairly steep curve and you know,
Speaker 2: in one to two years, people running factories generally are
Speaker 2: happy with with the productivity that they're getting.
Speaker 1: And what other similarities would there be. We're talking about
Speaker 1: this transfer of manufacturing from China and parts of Southeast
Speaker 1: Asia into Africa now, but if you look at the
Speaker 1: way that the Southeast Asian economies developed during that period
Speaker 1: of sixties, seventies, eighties, what the similarities do you expect
Speaker 1: there to be with the African economies in if you
Speaker 1: remember those Southeast Asian economies in the beginning, where we're
Speaker 1: very closed, you know, lots of tariffs and regulations and
Speaker 1: lots of capital controls even to keep growth internalized. Is
Speaker 1: that the way you expect to see the African economies
Speaker 1: go as well.
Speaker 2: I mean, if we're talking in a very geographically specific
Speaker 2: way about Southeast Asia and we're thinking about countries like
Speaker 2: Indonesia and the Philippines, then I think that Africa will
Speaker 2: be more like that than it will like the Northeast
Speaker 2: Asian countries with the sort of super competent governments in
Speaker 2: Japan and Korea and China and day Vietnam. So I
Speaker 2: think it will be more like traditional Southeast Asia. And
Speaker 2: you can already see certain things. So going back to
Speaker 2: the businesses that I was talking about that have come
Speaker 2: out of agriculture, the agricultural manufacturers and processors. You can
Speaker 2: already see them evolving in the way that a company
Speaker 2: like CP Group did in Thailand or Salim Group did
Speaker 2: in Indonesia, that they get these cash flows, very good
Speaker 2: cash flows out of agricultural processing. I mean Salem was
Speaker 2: making noodles, CP was doing seeds, and then they take
Speaker 2: that money and they build these kind of Christmas tree conglomerates.
Speaker 2: And you can see this happening already in Africa. So
Speaker 2: in Tanzania you have Buckrazer as the biggest agribusiness enterprise
Speaker 2: and they operate across ten countries now and they're doing
Speaker 2: all our agri business and they're basically millers. But on
Speaker 2: top of that, they've also now got hydrofoil businessiness is
Speaker 2: going out a Zanzibar, They've got real estate, they've got
Speaker 2: a TV station, they've got a football club, and you know,
Speaker 2: with a kind of oligarch at the top, it all
Speaker 2: feels to me quite Southeast Asian, and I think that
Speaker 2: I think that much of Africa will go in that
Speaker 2: kind of direction. It's way less efficient developmentally than what
Speaker 2: you get in in a Vietnam or a China or
Speaker 2: a Japan but it's not bad. Still progress, It's still progress.
Speaker 1: Yeah. Should we worry about a commodity supercycle? And that
Speaker 1: much conversation these days about sharply rising prices of commodities
Speaker 1: across the board copper, silver, or pladium, that rare earth metals,
Speaker 1: et cetera. And you know, there is the resource curse,
Speaker 1: isn't there? If there is another commodity supercycle and we
Speaker 1: see all these prices going up massively, is that good
Speaker 1: for long term growths Africa or is it a problem?
Speaker 2: How good it is depends on how well the money
Speaker 2: is used, and in previous cycles that the money hasn't
Speaker 2: been well used, which is why I'm so happy to
Speaker 2: see this demographically driven growth in agriculture producing more stable developments.
Speaker 2: I mean, you can look at you know, if you
Speaker 2: look at African growth since twenty fourteen, the end of
Speaker 2: the China boom, Africa didn't collapse into acute negative growth
Speaker 2: as it did after previous cycles. And my feeling is
Speaker 2: that a lot of that is down to the fact
Speaker 2: that now, you know, you've just got this more diverse economy.
Speaker 2: So I think with the minerals, I mean, I hope
Speaker 2: that that governments are learning some of the lessons from
Speaker 2: previous commodity cycles. I don't say for a moment that
Speaker 2: Africa shouldn't think about its commodities. If you can sell it,
Speaker 2: you should. One of the big questions going forward will
Speaker 2: be whether governments managed to exercise bargaining power to have
Speaker 2: minerals used for manufacturing. Within their efforts to do this
Speaker 2: around the seven main minerals that are used in battery production.
Speaker 2: It isn't yet clear what that's going to lead to,
Speaker 2: but it can obviously make a big difference. I mean,
Speaker 2: Jakoi and Indonesia was pretty successful in negotiating with Chinese
Speaker 2: companies in particular for local manufacturing production if they wanted
Speaker 2: access to nickel and other minerals that the Indonesians produce.
Speaker 2: So we just have to wait and see if African
Speaker 2: governments can replicate that, and I think that for me
Speaker 2: is going forward is the biggest unknown in Africa is
Speaker 2: the extent to which governance will respond to thicker populations,
Speaker 2: greater growth, greater capacity to raise taxes and therefore expand
Speaker 2: the capabilities of government. To what extent will African governments
Speaker 2: respond to this more benign positive environment and up their game?
Speaker 2: And I just don't know. The only thing that I
Speaker 2: would say with some confidence is there's going to be
Speaker 2: phenomenal variation between countries.
Speaker 1: Let's take you back a little bit to China we
Speaker 1: were talking about earlier and the rise of Chinese investment
Speaker 1: into manufacturing in Africa, and obviously there's been lots of
Speaker 1: Chinese involvement in the mining sector as well. But one
Speaker 1: of the things that people worry about now pretty much
Speaker 1: across the continent is the amount of money that the
Speaker 1: Chinese have one way or another lent into Africa. And
Speaker 1: there's a high level of debt that lots of African
Speaker 1: countries now have for infrastructure projects in particular, and that
Speaker 1: might sort of slightly imprison them in the future.
Speaker 2: I tried to stand back from this, and I feel
Speaker 2: that the Chinese influence in Africa overall has been significantly
Speaker 2: positive because Chinese banks have lent over one hundred and
Speaker 2: fifty billion dollars. Now. It was not done in a
Speaker 2: terribly clever way. I mean, the Chinese themselves will say
Speaker 2: privately at least that yes, we were bloody stupid with
Speaker 2: some of the things that we did. I don't think
Speaker 2: that they went in with a sort of agenda to
Speaker 2: get people into debt bondage. What they wanted to do
Speaker 2: was lend the money to support the purchase of Chinese
Speaker 2: goods and services, because China is in Africa fundamentally for
Speaker 2: the same reasons that the Japanese were in Southeast Asia
Speaker 2: in the seventies and the eighties, and the Koreans were
Speaker 2: in the Middle East in the eighties and the nineties
Speaker 2: building infrastructure and selling capital goods and selling consumer goods
Speaker 2: that are there because they've run this economic development policy
Speaker 2: where you massively overemphasize the role of manufacturing, massively over
Speaker 2: you subsidize heavily manufacturing your economy, and you end up
Speaker 2: with surplus, and that surplus has to go somewhere. So
Speaker 2: what the Chinese are doing with a surplus in Africa
Speaker 2: is entirely the same as what the Japanese were doing
Speaker 2: with it in the seventies and the and the Koreans
Speaker 2: in the in the eighties. The thing to recognize is
Speaker 2: that where the Chinese have got to now is that
Speaker 2: at a political level, Belton Road has been very heavily
Speaker 2: wound down, not with any formal announcement of it's over,
Speaker 2: but I mean they've just pulled back, and various agencies
Speaker 2: that have been set up by the Chinese banks to
Speaker 2: do private equity in Africa and things like this have
Speaker 2: just been shot at. I mean, there are some projects
Speaker 2: that are funded by state banks, but they've got to
Speaker 2: jump over much higher hurdles to get done. But what
Speaker 2: we're what we're seeing when we talk about investment in
Speaker 2: manufacturing is private sector stuff from Chinese corporates that are
Speaker 2: not getting the backing of the state banking system.
Speaker 1: Should we talk about some individual countries, which where are
Speaker 1: you most optimistic? Where do you look and think, well,
Speaker 1: that's the new Singapore.
Speaker 2: Well, the one that claims to be the new Singapore
Speaker 2: is Rwanda, of course, and you think this is insane
Speaker 2: when you hear it, but actually there's a certain logic
Speaker 2: to it, you know, because cogum is people say, well, look,
Speaker 2: it costs you a couple of thousand dollars to ship
Speaker 2: a container from China to Daris alarm, and it costs
Speaker 2: you five thousand dollars to truck it to Kigali. So
Speaker 2: that means that you can produce stuff here in Rwanda
Speaker 2: and not even be particularly efficient, put it together here
Speaker 2: and sell the stuff. They haven't really done it with
Speaker 2: manufacturing yet, but they have done it with services, and
Speaker 2: of course a lot of Singapore is services. In the
Speaker 2: book that says, you know, brutal but developmental, and I
Speaker 2: think that's what it is. So yeah, And it is
Speaker 2: a very real question when you have acutely poor, malnourish
Speaker 2: people about what is what is the right priority? And
Speaker 2: Kagama will tell you that the right priority is to
Speaker 2: increase GDP and reduce polity, keep.
Speaker 1: Ahead as quickly as possible. And where would you go
Speaker 1: back to in a hurry?
Speaker 2: I was really upset to see the civil war that
Speaker 2: broke out in twenty twenty in Ethiopia because they were,
Speaker 2: you know, the second most populous nation in Africa, and
Speaker 2: they really have been getting the tracks set down in
Speaker 2: the right way. I will certainly go back to ETHOPI
Speaker 2: I'd probably go back soon because I want to see
Speaker 2: where they are at now under RB. I think my
Speaker 2: guess is that they will continue to do relatively well
Speaker 2: because I just think they've got the basics in place
Speaker 2: and the commitment to the small holder agriculture that they
Speaker 2: have the commitment of manufacturing, that they have the willingness
Speaker 2: to engage in a bit of financial repression to support
Speaker 2: those two things. I feel that all of that is
Speaker 2: still the and they have a really excellent civil service
Speaker 2: that has been doing this for thirty years now. So
Speaker 2: I remained somewhat somewhat optimistic about about Ethiopia. I'm also
Speaker 2: strangely optimistic about Nigeria. I mean, I think everybody should
Speaker 2: go to Lagos just to see the mayhem. They said
Speaker 2: that ninety percent of the population wakes up every morning
Speaker 2: and doesn't know how it will eat, but everybody does
Speaker 2: eat by the end of the day. Yeah. I mean,
Speaker 2: if ever you wanted an exercise in understanding just how
Speaker 2: a great density of people can produce a lot of
Speaker 2: creativity and a lot of value, then I think Lagos
Speaker 2: is a very good place to go and you get
Speaker 2: you know, other places that are of interest. In Benin,
Speaker 2: also in West Africa, a very small country. But Patrice Talon,
Speaker 2: who around the country for two terms, you know, semi autocratically,
Speaker 2: but got very focused on on development, and his deputy
Speaker 2: has now taken over, won an election and taken over
Speaker 2: from him, So I think there's something to be positive
Speaker 2: about that. But I think it's probably a mugs game
Speaker 2: to try and pick winners in Africa and I and
Speaker 2: I you know, I prefer just to stand back and
Speaker 2: say I'm optimistic about the well, I'm more optimistic about
Speaker 2: the thing overall than I would have been by a
Speaker 2: big margin than I would have been twenty years ago.
Speaker 1: Okay, brilliant, Thank you so much for joining us today.
Speaker 1: Thanks for listening to this week's Maren Talks Money. If
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